Viad's Payment Arm Could Pay Off Big

Viad (VVI ) may well have to split itself into two: The slump has walloped its convention-and-events business, while its high-margin, high-growth payment services unit has showed sterling results. So Viad may sell or at least spin off the latter to unlock its underlying worth, says Marc Shapiro of Awad Asset Management, who has accumulated shares. The payment unit handles transactions for banks and other institutions--processing money orders, electronic payments, and fund transfers. Shapiro notes that payment services account for just 30% of revenues, while conventions kick in 70%. In the second quarter, payment services' sales rose 12%, and earnings 14%. Meanwhile, convention sales fell 14%, and earnings tumbled 30%.

Donald Zwyer of Lehman Brothers figures that the value of Viad's two major businesses is more than the stock's current price of 24: He says payment services alone is worth 26, based on 20 times his 2002 earnings estimate of $1.33 a share. The convention business is worth 6, or 12 times his 2002 estimate of 52 cents.

So Zwyer argues that on a sum-of-the-parts basis alone the stock is worth 32. Zwyer, who rates Viad a strong buy, expects the company to produce earnings of $1.55 a share in 2001 and $1.85 in 2002.

By Gene G. Marcial

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